As investors navigate a rising rate environment and make adjustments to their fixed income portfolios, there are many ETF strategies in the marketplace to choose from.
Among those strategies is the Invesco BulletShares suite, which Invesco acquired as part of Guggenheim’s ETF business earlier this year.
The BulletShares suite comprises of high-yield fixed-income ETFs that carry interest rate hedging since the bonds are typically held until maturity.
“BulletShares is definitely one of the most important areas that we brought over,” said Dan Draper, Managing Director, Global Head of Invesco ETFs, at the Morningstar Investment Conference. “To take the open-ended nature of an ETF, like a mutual fund, but then to actually have a final maturity date and to that certainty of kind of principle return, that’s really really important for many investors.”
By using defined maturity high yield ETFs like the Invesco BulletShares High Yield ETFs, investors are able to capitalize on the incremental carry offered by high yield, but potentially reduce the impact of spread widening or rising rates if they occur as the bonds are typically held to maturity.
Draper said the BulletShares suite allowed investors to build “laddered portfolios” in a rising rate environment.
“It’s an important innovation,” he said.
On the BulletShares website, investors can use a tool to select an ETF bond ladder scenario and adjust the weighting to view the effects on effective duration, yield to maturity and SEC yield when including BulletShares ETFs in a standard fixed income portfolio.
Earlier this week, Tim Urbanowicz, Senior Fixed Income ETF Strategies at Invesco, told ETF Trends that fundamentals in the high yield market appear strong.
“So far in 2018, we are seeing many investors rotating out of traditional high yield vehicles and into defined maturity ETFs in the Invesco BulletShares suite,” Urbanowicz said.
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